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2. An investor(buys a European put on a share for $2. The stock price is $42 and the strike price is $40. a) Under what

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2. An investor(buys a European put on a share for $2. The stock price is $42 and the strike price is $40. a) Under what circumstances the option is out of money? (5 marks) b) Under what circumstances will the option be exercised? ( 5 marks) c) Draw diagram showing the variation of the investor's profit with the stock price at the maturity of the option. ( 8 marks)

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